Public Option Debate: Government as a Predator vs. Risking Medicare

ABC News' Z. Byron Wolf reports: Senators on the Finance Committee are in the midst of a thoughtful debate on whether they should reject Democrat Max Baucus’ centrist proposal for health reform and tack onto the Senate’s health reform bill a government-run health insurance option that most Democrats support to help drive down costs in the private market.

And it led to one of the most pointed exchanges of this debate so far.

“Placing (health care) in the hands of a Washington, DC bureaucracy and I don't know many people in this country that think that is the way to solve the problem,” said Utah Republican Orrin Hatch.

Or, as Sen. Charles Grassley, R-Iowa, put it, “A public insurance plan will ultimately put private insurers out of business,” he said.

But Democrats on the committee pointed out that the government already runs a big portion of health care in the US, and people who get government-run health care like it.

“The main knock is that its government run. Medicare is government run and people like it very much,” Schumer said. Government data would seem to back him up.

Schumer pointedly told Grassley that if he opposes a public option,“What you're saying is we should have no Medicare because it is a government run plan.”

Grassley shot back that Medicare is not at issue because it is now part of the “fabric of our society.”

And he said despite the existence of private plans that have bundled Medicare benefits for seniors, the private market cannot exist alongside a public option because “the government isn't a fair competitor. It’s a predator,” Grassley said.

Hatch pointed out that Medicare, for its popularity among seniors, is on a fiscally unsustainable level.

“As much as Medicare is accepted, it’s still 38 trillion in unfunded liability,” Hatch said.

Democrats foresee a comprehensive health reform bill helping to drive those costs down, in part by creating competition.

Proponents of a public option counter claims of a government takeover by arguing that it will actually create more competition. little competition among insurers in many regions. According to an American Medical Association Study that has been much quoted in this debate , in more than 60 percent of markets, both HMO and PPO, one insurer controls more than half the market.

There are two public option proposals on the table – the one from Sen. Jay Rockefeller would create a system like Medicare where the government decides unilaterally how much to pay doctors and hospitals for people who choose to enroll in the public plan.

A proposal by Sen. Chuck Schumer, D-N.Y., tweaks that by mandating that the government negotiates those rates with health care providers instead of simply mandating them.

“It simply guarantees there's one health insurance plan in the exchange that ordinary Americans can afford and count on to have more moderate premiums,” said Rockefeller in arguing for his plan. He pointed out that the bill forces Americans who don’t have insurance to get it, which would create a boon for insurance companies.

“On the face of this we're giving (insurance companies) over a half a trillion more subsides. Who comes first? The insurance companies or the American people,” he asked.

There has not yet been a vote on the two amendments to the bill the Senate Finance Committee is considering.

Democrats from rural Midwestern states are particularly nervous about Rockefeller’s idea, which for several years would peg the amount paid by the Public Option to hospitals and doctors at the level paid by Medicare.

“If you tie Medicare levels of reimbursement to a public option in my state every hospital in my state goes broke,” said Conrad.

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